Cineworld faces legal action for pulling out of Cineplex deal

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Closure of cinemas has wiped more than C$1bn from Canadian company’s value.

Cineworld, the world’s second-largest cinema chain, is facing the threat of costly legal proceedings after its Canadian rival Cineplex launched action against it for pulling out of a $2.3bn deal that was due to complete this month.

The Toronto-headquartered Cineplex said on Monday that after Cineworld’s “abandonment” of the acquisition, it would “promptly” start legal proceedings and seek damages for the UK cinema group’s breach of the agreement. Cineworld had agreed to pay C$34 per share for Cineplex in December with the deal due to be completed at the end of June, subject to Canadian competition authority approval. But the near total closure of cinemas worldwide as a result of the coronavirus pandemic has wiped more than C$1bn ($736m) from Cineplex’s market valuation.

“The deal looked like it made a lot of sense. It looked like quite a decent business . . . But we are in a very different world now. From an operational point of view, Cineworld have enough to do with their own estate at the moment without trying to take on another chain as well,” said Richard Marwood, a senior fund manager at Royal London Asset Management, which holds a 2.5 per cent stake in Cineworld. Wes McCoy, investment director at Aberdeen Standard Investments, a top 10 Cineworld shareholder, said: “We are very comfortable with them not completing the transaction. So many views of the future have been changed.” Several deals have fallen apart on acrimonious terms since the pandemic hit but the Cineworld deal is one of few involving a UK-listed company.

 

Read more:https://www.ft.com/content/d4374d4a-a4e4-4ef7-b2aa-0dc3b2a7e891